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NORTHBROOK, Ill. - On Wednesday, Stepan Company (NYSE:SCL) reported third quarter earnings that fell short of analyst expectations, as higher costs related to its new Pasadena facility and increased tax rates weighed on profits.
The company’s stock slipped 1.29% in pre-market trading following the announcement.
The chemical manufacturer posted adjusted earnings of $0.48 per share for the third quarter, missing the analyst consensus of $0.62. Revenue came in at $590.28 million, slightly below analyst estimates of $593.65 million but up 8% compared to the same period last year.
While the company’s adjusted EBITDA grew 6% to $56.2 million and global sales volume increased 1% YoY, net income fell sharply by 54% to $10.8 million. The decline was primarily attributed to a higher effective tax rate and increased interest expenses, along with $8.6 million in pre-tax costs associated with the start-up of the company’s new alkoxylation site in Texas.
"Third quarter adjusted EBITDA grew 6% and free cash flow improved to $40.2 million dollars for the quarter," said Luis E. Rojo, President and Chief Executive Officer. "We achieved these positive results despite higher start-up expenses at our Pasadena site and a significant run up in oleochemical raw material costs."
The Polymer segment showed strength with volume up 8%, while Surfactants experienced mixed results with double-digit growth in Agricultural and Industrial Cleaning markets offset by lower demand in commodity Consumer Products.
Looking ahead, Stepan remains focused on improving product mix and accelerating free cash flow generation. The company expects to close an asset sale in the Philippines during the fourth quarter and maintains its outlook for full-year adjusted EBITDA growth despite ongoing market uncertainties.
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